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Barely half of Generation Y pays its bills on time and a third of all adults don't know their credit scores, a financial survey released Tuesday has found.
The joint survey of 1,001 Americans, conducted by Princeton Survey Research Associates International for the National Foundation for Credit Counseling and MSN Money, found an America largely unprepared for economic hard times.
"If there were ever a time that Americans needed to embrace financial literacy, it is now," said Susan C. Keating, president and CEO of the nonprofit counseling agency.
With many economists suggesting that the United States either is in a recession or is facing one, basic financial skills would help consumers stay afloat, says MSN Money Editor in Chief Richard Jenkins.
"Learning to manage money is like any other skill," Jenkins said. "You've got to take the time to learn the basics and then practice, practice, practice."
Some of the survey's key findings:
A significant number struggle with mortgages and the complexity of buying a home. One in every 10 Americans with a mortgage, or roughly 10 million adults, report being late on or missing a mortgage payment in the last year. Adding more stress to the current housing market, almost one-quarter of Americans say they do not know enough about owning a home to consider buying one. (See "Where strapped homeowners can find help.")
Millions have serious difficulties paying bills each month, most notably Generation Y. Although a majority of survey respondents report they pay their bills on time and do not have any debts in collections, a notable minority has fallen behind and is struggling, with 7%, or roughly 15 million adults, either getting calls from collectors or seriously considering filing for bankruptcy.
Higher-income households and older Americans are more likely to stay on top of their bills. And whites and Latinos are more likely to pay their bills on time and stay clear of collections than blacks. Alarmingly, only 59%, or roughly 23 million, of the young adults ages 18-29 pay their bills on time every month. (See "Late payments hit 16-year high.")
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Only a minority keep close track of expenses and spending. Although a majority of the public has at least a somewhat good idea of where their money goes each month, nearly two in 10, or roughly 40 million adults, keep little or no track at all. Contrary to some stereotypes, how closely Americans manage their money does not vary by gender, age or income. Women continue to be as likely as men, younger people as likely as older people, and lower income households as likely as higher income ones to keep close track of what they spend. (See "Your 5-minute guide to budgeting.")
Savings and emergency funds are lacking. A majority of the public does not have a sufficient emergency fund, defined as three to six months income saved. More than one-third say they do not have any nonretirement savings. And more than one-quarter are not saving for retirement. (See "Save your emergency fund for the real thing.")
Many Americans are underinsured; Latinos are at higher risk. Even though the baby-boom generation has come of age, only a little more than one quarter say they have long-term care insurance. Another at-risk group is renters, with only one in 10 saying they have renters insurance. Latinos are also less likely to have medical and life insurance than whites or blacks.
Most haven't ordered a credit report. Financial experts recommend that consumers check their credit history at least once a year. Yet only a minority of Americans have ordered credit reports in the past year, in spite of the fact that it can be acquired for free. And roughly 72 million adults readily admit that they do not know their credit score. (See "How to get your credit report for free.")
Parents and home are the biggest influences on financial education. Almost half of those who closely monitor their finances are more likely to say that they learned about personal finance from their parents or at home, underscoring the potential positive influence parents can have on their children financially. To a lesser extent, some say they learned the most about personal finance on their own, followed by a financial professional, self-help sources, school, work, friends, and their spouse or partner. (See "Should your kids get an allowance?")
Americans worry about future income growth; the Midwest has the greatest concerns. And matters are not likely to improve, according to some Americans. Only one-quarter expect their income to outpace inflation. And more than half of all Americans believe their income will shrink, not keep pace with inflation or stay even. This worry is greatest among Americans in the Midwest, at nearly 70%.
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